What to Do After an Account Holder Passes Away?

Losing a loved one is incredibly difficult, and dealing with their finances can add to the stress. If you have recently lost someone and need to manage their bank accounts or credit cards, you might wonder what happens next.

Closing a bank account can be important, especially to cover funeral expenses or settle any debts. While the process can seem complicated, it can be handled smoothly with the right paperwork. In this guide, you will find everything regarding what to do when a bank account holder dies.

Step 1: Obtain the Death Certificate

The death certificate is a crucial document required for almost every legal and financial process after someone passes away. You will need multiple copies of it, as banks, insurance companies, and government agencies will ask for one.

How to Get a Death Certificate?

• If your loved one passes away in a hospital, the hospital will give you a certificate.
• If they passed away at home, you might need to contact the local registrar or a funeral home to get the certificate.
• You can also get copies from the government’s vital records office in the state or country where they lived.

Note: It’s a good idea to request at least 10-15 copies because you may need to submit them to various institutions.

Step 2: Gather Important Documents

Before you can take any action, you will need to collect key documents related to the deceased person. These documents will be required for verification, claims, and account closures.

Documents You May Need

• Death Certificate (Original and Copies)
• Account Holder’s ID Proof (passport, driver’s license, or any other official identification).
• Bank Passbook or Account Statements
• Credit card statements
• Loan or mortgage documents
• Insurance policies
• Retirement accounts (e.g., 401(k), pension plans)
• Investment portfolios
• Will or estate planning documents
• Nominee or Beneficiary Details

Step 4: Identify the Type of Account

The process of handling bank accounts depends on who owns the account and whether a beneficiary was named.

Types of Bank Accounts and What Happens to Them

• Joint Accounts with Survivorship Clause - If the account was jointly held with a survivorship clause, the surviving account holder automatically gets full access to the funds.
• Single Holder Accounts - If the account was solely in the deceased’s name, the nominee or legal heir must claim the funds.
• Fixed Deposits (FDs) and Recurring Deposits (RDs) - If a nominee is registered, they can claim the FD amount upon maturity or before. If no nominee is present, legal heirs must provide legal documents for the claim.
• Loan Accounts (If Any) - If the deceased had an active loan, the repayment responsibility falls on the co-applicant, legal heir, or nominee. If a loan protection insurance policy existed, the insurer might cover the remaining loan amount.

Step 5: Notify Credit Card Companies and Close Credit Accounts

Credit cards do not automatically transfer to surviving family members unless they are joint account holders.

How to Close a Credit Card After Death?

• Call the credit card company and let them know about the account holder's death.
• Give them a copy of the death certificate and any other documents they ask for.
• Request a final statement to see if there are any unpaid balances.
• If there is debt, find out if it needs to be paid from the estate or if it's covered by a credit protection plan.

Note: Surviving family members are not responsible for the deceased’s credit card debt unless they were a co-signer on the account.

Step 6: Claiming Insurance Benefits

If the deceased had a term insurance policy, it could be a financial relief for the family. Term insurance is a life insurance policy that provides a lump sum payout to the nominee if the insured person passes away.

How to Claim Term Insurance?

• Notify the insurance provider about the death.
• Submit the required documents (death certificate, insurance policy details, nominee’s ID proof and bank details)
• The insurer verifies the documents and processes the claim within a few weeks.

The payout from a term insurance policy can help cover funeral costs, outstanding loans, or daily expenses, easing the financial stress on the family.

Step 7: Managing Investments and Other Financial Assets

Apart from bank accounts, the deceased may have held investments in stocks, mutual funds, or real estate. Here’s how to handle them:

Stocks and Mutual Funds

• If the deceased had investments, the nominee can claim them by submitting relevant documents to the brokerage firm. 
• If no nominee is present, legal heirs must obtain a probate of will or succession certificate to claim assets.

Real Estate and Property

• If the deceased owned property, the title must be transferred to legal heirs.
• If a will exists, it determines how the property is distributed
• If there is no will, legal heirs must go through a legal process to transfer ownership.

Step 8: Settle Tax and Legal Formalities

The deceased’s income tax return (ITR) for the financial year of death must be filed by their legal heir. If they had any pending tax dues, they need to be cleared.

How to file the final ITR?

• Register as a legal heir on the income tax portal.
• Gather all income-related documents.
• File the return and pay any pending tax liabilities.

If the deceased had any legal matters or pending court cases, consult a lawyer to resolve them.

Read More: Legal Heir Certificate

You need to have legal permission to terminate a bank account on someone else's behalf after they pass away. If you are not a joint owner then you must possess all required documents to issue a valid death claim. All paperwork that you will need to terminate a bank account after a loved one passes away is summarised below.

• Photocopy of the original account holder’s death certificate
• A copy of the lawful heir’s succession certificate
• Your ID proof (Aadhaar card, PAN card, and Voter ID) provided you are the claimant

Joint account holders contemplating what to do when a bank account holder dies, need to follow a separate procedure. In those cases, a surviving account owner must submit a request to that bank giving all necessary proof. This requires producing the deceased person's death certificate in front of the designated officials. After verification is completed, the surviving holder can simply withdraw the sum to his individual account.

The Banking Regulation Act allows due designation of depositors' funds for transfer when a bank account holder dies. The following regulations are in accordance with Sections 45-ZA and 45-ZB of the Banking Regulation Act of 1949:

When a joint deposit is held by a bank, the depositor, or if applicable, all concerned depositors together, may designate one person as a nominee. Then a bank will return the deposited amount to this individual if either the sole depositor or all the depositors pass away.

Although some banks do have units providing inheritance assistance, bank employees are often restricted from giving heirs much useful advice about what to do when a bank account holder dies. For better guidance, it is advised to seek legal counsel or to get in touch with any civil court.